[Federal Register Volume 82, Number 10 (Tuesday, January 17, 2017)]
[Notices]
[Pages 4954-4956]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-00779]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79766; File No. SR-BatsBZX-2016-92]


Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Amending 
Fees To Adopt a New Cross-Asset Step-Up Tier

January 10, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on December 30, 2016, Bats BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II 
and III below, which Items have been prepared by the Exchange. The 
Exchange has designated the proposed rule change as one establishing or 
changing a member due, fee, or other charge imposed by the Exchange 
under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) 
thereunder,\4\ which renders the proposed rule change effective upon 
filing with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend the fee schedule applicable 
to Members \5\ and non-members of the Exchange pursuant to BZX Rules 
15.1(a) and (c).
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    \5\ The term ``Member'' is defined as ``any registered broker or 
dealer that has been admitted to membership in the Exchange.'' See 
Exchange Rule 1.5(n).
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    The text of the proposed rule change is available at the Exchange's 
Web site at www.bats.com, at the principal office of the Exchange, and 
at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant parts of such 
statements.

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to adopt a new Tier 4 under footnote 3, 
Cross-Asset Step-Up Tiers and to rename the existing Tier 4 as Tier 5. 
Currently, with respect to the Exchange's equities trading platform 
(``BZX Equities''), the Exchange determines the fee charged for the 
removal of liquidity or the rebate for adding liquidity that it will 
provide to Members using the Exchange's tiered pricing structure, which 
is based on the Member meeting certain volume tiers based on their ADAV 
\6\ as a percentage of TCV \7\ or ADV \8\ as a percentage of TCV. 
Included amongst the volume tiers offered on BZX Equities are four 
Cross-Asset Step-Up Tiers, which require participation on the 
Exchange's equity options platform (``BZX Options''). The current 
Cross-Asset Step-Up Tiers provide rebates of $0.0027, $0.0028 and 
$0.0029 per share for Tier 1, Tier 2, and Tier 3, respectively, and 
charge a fee of $0.00295 per share for the existing Tier 4. To qualify 
for Tier 1, a Member must have an Options Step-Up Add TCV \9\ that is 
equal to or greater than 0.30%. To qualify for Tier 2, a Member must 
have an Options Step-Up Add TCV \10\ that is equal to or greater than 
0.40%. To qualify for Tier 3, a Member must have an Options Add TCV 
\11\ greater than or equal to 0.30% and have a Step-Up ADAV from June 
2015 greater than [sic] 1,000,000. The existing Tier 4 requires a 
Member to have an Options Customer Remove TCV \12\ greater than or 
equal to 0.30% and a Step-Up Remove TCV \13\ from July 2016 greater 
than or equal to 0.05%.
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    \6\ As defined in the Exchange's fee schedule available at 
http://www.bats.com/us/equities/membership/fee_schedule/bzx/.
    \7\ Id.
    \8\ Id.
    \9\ Id.
    \10\ As defined in the Exchange's fee schedule available at 
http://www.bats.com/us/equities/membership/fee_schedule/bzx/.
    \11\ Id.
    \12\ Id.
    \13\ Id.
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    The Exchange now proposes to adopt a new tier, Tier 4, and to 
rename the existing Tier 4 as Tier 5. Under the proposed new Tier 4, 
the Exchange would provide a rebate of $0.0032 per share to Members 
that have an Options Step-Up Add TCV in Customer \14\ orders from 
October 2016 baseline greater than or equal to 0.35%. Other than 
renaming current Tier 4 as Tier 5, no additional changes are proposed 
for the renamed Tier 5.
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    \14\ As defined in the Exchange's fee schedule available at 
http://www.bats.com/us/equities/membership/fee_schedule/bzx/.
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Implementation Date
    The Exchange proposes to implement these amendments to its fee 
schedule January 3, 2017.\15\
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    \15\ The Exchange notes that the date of its fee schedule was 
previously updated to January 3, 2017 in SR-BatsBZX-2016-87 
(December 6, 2017 [sic]). See Securities Exchange Act Release No. 
79636 (December 21, 2016).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\16\ in general, and 
furthers the objectives of Section 6(b)(4),\17\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its Members and other persons using its 
facilities. The Exchange also notes that it operates in a highly-
competitive market in which market participants can readily direct 
order flow to competing venues if they deem fee levels at a particular 
venue to be excessive. The proposed rule change reflects a competitive 
pricing structure designed to incent market participants to direct 
their order flow to the Exchange. The Exchange believes that the 
proposed rates are equitable and non-discriminatory in that they apply 
uniformly to all Members. The Exchange believes the fees and credits 
remain competitive with those charged by other venues and therefore 
continue to be reasonable and equitably allocated to Members.
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    \16\ 15 U.S.C. 78f.
    \17\ 15 U.S.C. 78f(b)(4).
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    Volume-based rebates such as the proposed Cross-Asset Step-Up Tier 
4 have been widely adopted by equities and options exchanges and are 
equitable because they are open to all Members on an equal basis and 
provide additional benefits or discounts that are reasonably related to 
the value to an exchange's market quality associated with higher levels 
of market activity, such as higher levels of liquidity provision and/or 
growth patterns, and introduction of higher volumes of orders into the 
price and volume discovery processes. The Exchange believes that the 
proposal to add a Cross-Asset Step-Up Tier 4 is a reasonable, fair and 
equitable, and not unfairly discriminatory allocation of fees and 
rebates because it will provide

[[Page 4955]]

Members with an additional incentive to reach certain thresholds on 
both the BZX Equities and BZX Options. The increased liquidity from 
this proposal also benefits all investors by deepening the BZX Equities 
and BZX Options liquidity pools, offering additional flexibility for 
all investors to enjoy cost savings, supporting the quality of price 
discovery, promoting market transparency and improving investor 
protection. Such pricing programs thereby reward a Member's growth 
pattern on the Exchange and such increased volume increases potential 
revenue to the Exchange, and will allow the Exchange to continue to 
provide and potentially expand the incentive programs operated by the 
Exchange. To the extent a Member participates on BZX Equities but not 
on BZX Options, the Exchange does believe that the proposal is still 
reasonable, equitably allocated and non-discriminatory with respect to 
such Member based on the overall benefit to the Exchange resulting from 
the success of BZX Options. As noted above, such success allows the 
Exchange to continue to provide and potentially expand its existing 
incentive programs to the benefit of all participants on the Exchange, 
whether they participate on BZX Options or not. The proposed pricing 
program is also fair and equitable in that membership in BZX Options is 
available to all market participants which would provide them with 
access to the benefits on BZX Options provided by the proposed changes, 
as described above, even where a Member of BZX Options is not 
necessarily eligible for the proposed increased rebates on the 
Exchange. Further, the proposed changes will result in Members 
receiving either the same or an increased rebate than they would 
currently receive.
    Lastly, the Exchange believes the proposed tier's criteria and 
corresponding rebate are equitable and reasonable as compared to other 
Cross Asset Step-Up Tiers under footnote 3. For example, to qualify for 
Tier 3 and receive a rebate of $0.0029 per share, a Member must have an 
Options Add TCV greater than or equal to 0.30% and have a Step-Up ADAV 
from June 2015 greater than [sic] 1,000,000. Under the proposed tier, a 
Member would receive a higher rebate of $0.0032 per share where they 
satisfy more stringent criteria of having an Options Step-Up Add TCV in 
Customer orders from October 2016 baseline greater than or equal to 
0.35%.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe its proposed amendment to its fee 
schedule would impose any burden on competition that is not necessary 
or appropriate in furtherance of the purposes of the Act. The Exchange 
does not believe that the proposed change represents a significant 
departure from previous pricing offered by the Exchange or pricing 
offered by the Exchange's competitors. Additionally, Members may opt to 
disfavor the Exchange's pricing if they believe that alternatives offer 
them better value. Accordingly, the Exchange does not believe that the 
proposed change will impair the ability of Members or competing venues 
to maintain their competitive standing in the financial markets.
    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily direct order flow to competing 
venues if they deem fee structures to be unreasonable or excessive. The 
proposed changes are generally intended to offer an incentive resulting 
in a rebate for adding liquidity on the Exchange, which is intended to 
draw additional participants to the Exchange. The Exchange does not 
believe that the proposed new Cross-Asset Step-Up Tier 4 would burden 
competition, but instead, enhance competition, as it is intended to 
increase the competitiveness of and draw additional volume to the 
Exchange. The Exchange does not believe the proposed amendments would 
burden intramarket competition as they would be available to all 
Members uniformly.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from Members or other interested 
parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \18\ and paragraph (f) of Rule 19b-4 
thereunder.\19\ At any time within 60 days of the filing of the 
proposed rule change, the Commission summarily may temporarily suspend 
such rule change if it appears to the Commission that such action is 
necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of the Act.
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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-BatsBZX-2016-92 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-BatsBZX-2016-92. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BatsBZX-2016-92 and should 
be submitted on or before February 7, 2017.


[[Page 4956]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-00779 Filed 1-13-17; 8:45 am]
BILLING CODE 8011-01-P